Book Wars

The ruling came in a contentious antitrust lawsuit filed by Taylor
Publishing Co. against Jostens Inc., the market leader among yearbook
publishers. Last year, a federal jury in Sherman, Texas, ruled in favor
of Taylor, finding that Jostens had engaged in sham and predatory
pricing, raided Taylor's sales force, and interfered with its
contracts. The jurors awarded Taylor $8 million in damages, which under
antitrust law was tripled to $24 million.

But on January 14, U.S. District Judge Paul Brown granted Jostens'
motion to set aside the jury verdict and damage award. The judge ruled
that as a legal matter, there was not enough evidence to prove that
Jostens was out to monopolize the school yearbook market.

Despite the decision, the case made public some intriguing details
about the sales tactics of yearbook publishers. Taylor, a unit of the
Columbus, Ohio-based Insilco Holding Co., had fiscal 1997 sales of
$98.2 million. Jostens, based in Minneapolis, had 1997 sales of $632
million in its school-products division. About 37 percent, or $234
million, of that came from yearbook publishing, according to the
company's annual report. Jostens also sells class rings, graduation and
prom products, and business-recognition products.

A central charge in Taylor's lawsuit was that Jostens used "sham
pricing" to win customers. The company, the lawsuit argued, would quote
one price to win a school contract but charge more for the finished
product. Judge Brown said that such a practice might amount to fraud or
misrepresentation, but he ruled that Taylor had "failed to prove that
defendant's actions constituted predatory, anticompetitive
conduct."

Brown's opinion referred to a legal brief filed by Jostens that
defended the practice of charging customers more for finished
yearbooks. The company calls the practice "upgrading," and it involves
selling yearbook advisers and students on additional features that
boost the final price. Jostens, Judge Brown wrote, "argues that
upgrading is an ordinary and integral part of the yearbook business
that allows yearbook companies to sell additional features to customers
and, therefore, does not constitute predatory conduct."

Taylor's predatory-pricing allegations failed to pass muster, Judge
Brown said, because over three years, Jostens undercut Taylor in just
66 instances out of some 7,000 schools served by Taylor. "This evidence
amounts to a customer loss of less than 1 percent of plaintiff's annual
sales," the judge wrote. "The court finds that with an impact of less
than 1 percent, defendant's below-cost pricing was not capable . . . of
driving its competitors from the market."

Similarly, the judge said that the allegations that Jostens raided
Taylor's sales force did not amount to conduct that could lead to a
monopoly. Jostens hired away only three of Taylor's representatives,
which "had a negligible impact upon plaintiff's competitive position,"
Brown wrote.

Ken Koch, general counsel for Insilco, said the company would appeal
the ruling. "We obviously think the judge's decision was erroneous," he
said. "He rejected the jury verdict on factual determinations that
Jostens has engaged in predatory conduct."

Kevin Whalen, a spokesman for Jostens, said many of the allegations
centered on actions of its independent sales representatives. "Were
people doing some weird things out there in the past? Yes," he said.
"But we are policing our practices more aggressively. By and large, our
reps' hearts are in the right place."

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